Alvaro and Fernanda sold their home and made a profit of $562,000. What amount can they exclude from the gain on the sale?

When a couple sells their home and realizes a profit, they may be eligible to exclude a certain amount of that gain from their taxable income. According to the IRS rules on the sale of a principal residence, a married couple filing jointly can exclude up to $500,000 of gain from the sale, provided they meet certain conditions—primarily that they have owned and used the home as their principal residence for at least two of the five years preceding the sale.

In this case, since Alvaro and Fernanda made a profit of $562,000 from the sale of their home, they can exclude $500,000 of that gain from their taxable income. This rule helps to incentivize home ownership and supports families when they sell their residences. The remaining gain over the exclusion amount ($62,000 in this example) would be subject to capital gains tax.

The other amounts listed as choices do not align with the maximum exclusion allowed for married couples, making the $500,000 the only correct and applicable exclusion amount in this situation.